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by Admin
07 May 2024 2:49 AM
In a recent judgment, the Bombay High Court has quashed and set aside orders passed under the Income Tax Act, 1961, rejecting an application and imposing tax liability on the petitioners. The court held that the orders failed to meet the necessary requirements and violated established principles.
In the case of Writ Petition No. 1672 of 2021, the petitioners, Manjula D. Rita and Bhavya D. Rita, who are the legal heirs of Shri Dinesh Shamji Rita, challenged an order dated March 9, 2020, passed by the Principal Commissioner of Income Tax. The order rejected the petitioners' application under Section 264 of the Income Tax Act, 1961. The petitioners also impugned an order dated May 7, 2018, passed under Section 179(1) of the Act.
In their oral judgment, Justices K. R. Shriram and Firdosh P. Pooniwalla stated, "Not only the order dated March 9, 2020, but also the order passed on May 7, 2018, under Section 179 of the Act require to be quashed and set aside." The court highlighted that the order dated May 7, 2018, lacked grounds for commencing proceedings under Section 179 and failed to satisfy the necessary requirements.
The court further noted that there was no evidence indicating that any notice was issued to the deceased, and the order under Section 179 did not attribute non-recovery to gross neglect, misfeasance, or breach of duty. Additionally, the company in question was undergoing the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code. The court emphasized that the Director can be held responsible only when non-recovery is attributable to their actions.
High court stated, "Without going into the merits of the assessment order passed or whether the time was ripe to issue notice under Section 179 of the Act, we hereby quash and set aside the order dated March 9, 2020, passed under Section 264 of the Act, so also the order dated May 7, 2018, passed under Section 179 of the Act."
This judgment serves as an important reminder of the legal principles governing the imposition of tax liabilities and the requirement of proper procedures. It highlights the significance of giving due notice and considering the circumstances surrounding non-recovery before imposing such liabilities.
Date of Decision: 19th June 2023
Manjula D. Rita vs 1. Principal Commissioner of Income Tax